Life insurance

From ArticleWorld

Life insurance may be described as an insurance policy under which a sum of money is paid if the insured person dies while the policy is in effect. It is sometimes referred to as life assurance (in England); in addition to insuring life this policy may be used as a means of investment or saving. Ordinary life insurance and its many different forms provide a build-up of current value as well as a death benefit. This means that in the event of death of the insured, before the expiry of the insured period, a lump sum is paid to the beneficiary and in case no death occurs the principal amount along with the accrued interest is paid to the insured.


Insurance, in some form or another, began as a practice around 5000 B.C.; while life insurance, or helping the family of the dead with the funereal expenses and monetary gifts, began in ancient Rome with the establishment of ‘burial clubs’.

Life insurance, as we know it now, began around the 17th century in England and originally was meant for traders like ship owners and merchants. In the US the custom of insuring life began in the late 1760’s and within the next fifty years many insurance companies were set up all over the country. Interestingly, before the abolishment of slavery in America, due to the high mortality rate of the slaves, many slave owners found it advantageous to insure the slaves’ lives with themselves as beneficiaries.

Kinds of life insurance

A standard life insurance policy is of two kinds. A term life insurance gives coverage for a precise number of years for a precise premium, both agreed upon in advance. In this case the premium itself is considered as coverage and is given to the beneficiary or the owner of the policy only in the case of death of the insured.

Permanent life insurance, on the other hand, involves taking out a life insurance policy for a certain period, generally a long time (20-25 years) at the end of which the principal amount along with the accrued interest is given over to the policy holder. In the event of untimely death of the insured before the expiry of the period the whole amount (principal plus interest) is handed over to the beneficiary. The owner of the policy, during the life time of the policy is allowed to borrow cash against it and may also surrender it.